The logistics business is quite lucrative but incomparable to the freight forwarding in terms of business profits. However, it requires proper guidance as it can be very complex to navigate through its legal and regulatory landscape.
Legal Structure and Regulatory Requirements
In this comprehensive guide, you will discover the legal structure and regulatory requirements for starting a freight forwarding company in Nigeria.
We will cover the following subtopics:
1. Company Formation and Registration
2. Protection of Trademarks
3. Special Control Unit Against Money Laundering (SCUML) Registration
4. Contracts for Your freight forwarding Company
Services Offered by a Freight Forwarding Company
The freight forwarding company handles all the logistics, like booking transportation, filling out paperwork, and making sure the cargo complies with regulations. Just like a travel agent plans your trip, a freight forwarder plans the journey for goods, making sure they reach their destination smoothly.
Company Formation and Registration Requirements
It is illegal to carry on business without registering the business most especially for a freight forwarding company considering the paper works they will be involved in with many regulatory agencies.
The CAC which is one of the governmental agencies is the governmental agency saddled with the responsibility of registering business and non-governmental organizations.
The businesses can be registered as a company with three types: Limited Liability Company, Unlimited Company, and the Company Limited by Guarantee; the Limited Liability Company being the preferred and most popular choice for businesses interested in profits.
And for this reason, the Limited Liability Company will be our focus in this article.
Also Read: Understanding The Types Of Companies In Nigeria To Make The Best Choice in Business
To register a freight forwarding company must first meet the following requirements to be registered as a company.
- Shareholders
– Minimum Number: At least one shareholder is required.
– Who Can Be a Shareholder: Shareholders can be individuals or corporate entities. Nigerian citizens and residents can be shareholders.
Foreigners can also be shareholders, but they must comply with the Nigerian Investment Promotion Commission (NIPC) regulations and might need to obtain a business and residence permit.
2. Directors:
A minimum of one director is required for a private limited company. However, having at least two directors is recommended for better management and compliance.
– Who can be a Director: According to the Companies and Allied Matters Act (CAMA), a person qualified to be a director of the company must:
– Be above 18 years but not older than 70 years.
– Be a person of sound mind (not a mentally unstable person)
– Must not be a person declared by the bank to be a debtor.
– Not be disqualified by a High Court from being a director.
– Directors should possess relevant experience and qualifications to manage the company effectively.
3. Authorized Share Capital
The minimum authorized share capital for a Freight Forwarding company in Nigeria is 5 million.
This makes it possible for the company to have sufficient capital to operate within the regulatory framework.
Having this minimum share capital does not mean that is all the company needs to start the business. Just like cash at hand, machineries and human resources are some of the types of capital required to start the business, the share capital is also one of the types of capital that the company must have.
This share capital must be completely allocated to all the shareholders at the point of registration and the shareholders can pay for those shares over time.
4. Company Name
Search and reserve a unique company name with the Corporate Affairs Commission (CAC).
To search and reserve a name means that before you are allowed to use a company name, you first of all apply to the CAC. It is after following the due process that the CAC informs you on whether the name is available or not.
5. Registered Office Address:
Provide a physical address for the company’s operations in Nigeria.
6. Memorandum and Articles of Association (MEMART): Drafted documents outlining the company’s objectives, regulations, and operational guidelines.
7. Provide the particulars of the following:
- The directors
- Shareholders
- Company Secretary: The company secretary is the person responsible for administrative tasks such as keeping and filing documents on behalf of the company. However, this requirement is optional.
8. Filing Fees: Pay the required CAC filing and stamp duty fees and submit proof of payment.
9. Identification Details Needed:
For Directors and Shareholders:
– Full name
– Date of birth
– Gender
– Phone number
– Email address
– Residential address
– Means of identification (International Passport, National ID, Voter’s Card, or Driver’s License)
2. Company Secretary (if applicable):
– Name and address
– RC number (if a corporate entity)
– Means of identification
Please note that only one person can register a company and act as both director and shareholder where there are no foreigners involved in the creation of the company.
Where foreigners will be involved, a minimum of two directors will be required. Where the shareholders are individual foreigners, a minimum of two persons are required to be shareholders for the company.
Importance of SCUML Registration
All Freight Forwarding Companies are required to register with the Special Control Unit Against Money Laundering.
The Economic and Financial Crimes Commission (EFCC) is the agency responsible for the registration of the SCUML.
The reason for getting the SCUML certificate is because it is mandatory for all non designated financial institutions to register for a SCUML certificate.
The most important reason is that registration helps protect your business account from being targeted for money laundering.
Another reason is that it is necessary for opening a corporate bank account for the freight forwarding company.
The requirements for SCUML registration include:
– Certificate of Incorporation
– Memorandum and Articles of Association
– Form CAC 1.1 (or CAC 2 and CAC 7 for older registrations)
– Tax Identification Number (TIN)
– BVN, bank name, and account number
INTELLECTUAL PROPERTY PROTECTION
The law protects artistic, literary creations created from your mind. These creations are called intellectual properties.
In Nigeria, there are three main types: patents, copyrights, and trademarks. However for your business, trademarks are the most important.
A trademark is a unique sign that shows your company’s products or services are different from others. It could be a name, logo, or symbol.
For example, some products are known by their trade names such as like Coca-Cola or Apple or Mercedes or Toyota.
In fact, their names and logos are usually almost immediately recognizable.
A Certificate of Registration is what is usually given after successful registration to prove that the trademark belongs to you.
Patents protect inventions while Copyrights protect literary and artistic works.
Requirements for Trademark Registration
Registration of your trademark gives you the legal right to take legal action against anyone who wants to steal away your trademark.
The requirements for registering your trademark include:
– Any of the marks which you intend to register (name, logo, image, or symbol) or a combination of these.
– A description of the services of the Freight Forwarding company covered by the trademark
– Name of the owner of the company
– Contact details of the owner of the Freight Forwarding company
– Power of Attorney appointing an agent to do the registration (an accredited agent/lawyer may help to prepare the power of attorney)
– Upon registration, the Freight Forwarding company gets a trademark certificate which is valid for 7 years and can be renewed.
Also Read: What Every Business Owner in Nigeria Should Know About Intellectual Property Rights
CONTRACTS FOR YOUR FREIGHT FORWARDING COMPANY
The freight forwarding company will be involved in many contracts as a commercial company.
The reason it is important for the Freight Forwarding company to have contract documents readily available for its operations.
It is important to note that the contracts must be legally valid.
For a contract to be valid, it must include certain necessary details.
Our legal experts ensure these details are included to protect your business and prevent losses.
Some of the documents required include the following:
- Terms and Conditions for Booking Flights
To avoid disputes and ensure smooth operations, it is important to have clear terms and conditions in place for cargo documentations relating to warehousing, movement of the cargo on land, sea or air and storage services.
Therefore, this contract should detail the documentations, cargo movement, booking process, payment terms, cancellation policies, liability limitations, and customer responsibilities.
It should also include clauses on pricing, changes and cancellations, refunds, travel insurance, and disclaimers about third-party service providers.
A clear drafted terms and condition ensures customers are able to acknowledge and accept these terms before confirming their cargo transportation and documentation.
- Employee contract of employment
This document tells employees that are newly employed into the freight forwarding company, what their individual job description is, the salary they will receive, the rules to be followed while working with the company and the rules for resigning from the company.
- Company policies and employees handbook
The freight forwarding company should also have its rules and regulations that the company itself and every staff must abide with.
The document containing the company policies and the handbook usually includes the company’s work rules, the code of conduct, safety guidelines, and procedures for conflict resolution.
These rules and regulations provide a structured work environment for the staff thereby contributing to a harmonious workplace, boosting employee morale and their overall productivity.
- Website Terms of Use
Freight Forwarding services involve facilitating bookings for international cargo transportation either on land, sea or air with the documentations.
Where the company accepts these bookings via a website or application, it is necessary for the company to have well drafted website terms of use.
They explain what your customers can and can’t do when they visit the site.
They cover things like their rights, the website’s rights, and how disputes arising from missed cargo movement or booking mix ups can be resolved.
- Privacy Policy
In addition to the website terms of use, the company website also requires a privacy policy.
A Privacy Policy is like a set of rules that explain how your customer’s information is handled when they use your company’s website or applications.
The privacy policy document for a freight forwarding company usually includes details about how your customer and customer’s cargo information are collected, used, the security measures put in place and the procedures for getting access to the information or deleting the information.
You need these agreements to keep your customers rest assured that their personal and cargo information is safe with you and this brings about trust and integrity for the company.
- Refund Policy
Based on the commercial activity of a freight forwarding company, a refund policy will be of great importance to the business operations.
It is a set of rules that say when and how your customers can get their money back if they’re not happy with a service rendered.
It usually includes details like the conditions for refund, time frame for the refund, their eligibility criteria and any other special requirement for a refund.
It is needed to create a fair win for both you and your customers when the need for a refund arises.
- Independent Contract Agreement
An Independent Contractor Agreement is drafted when the company hires people such as freelancers or temporary staffs to do a specific job.
You agree on things like what they’ll do, how much they’ll be paid, and when it should be done.
It’s important because it shows that they’re not a full-time employee, so they might have different rights and responsibilities.
- Service Level Agreement
A Service Level Agreement is an agreement between a company and its customers.
It outlines the services rendered, the response time, performance metrics and procedures for dispute resolution.
It’s like a deal to make sure your customers are happy with the service they’re getting.
- Lease/Tenancy Agreement
Whether the company’s space is rented or leased, it needs a well drafted tenancy or lease agreement.
Having this agreement ensures legal compliance and secures operational space.
It also clarifies the responsibilities for both your company and the owner of the property.
Buying your own property? Ensure to follow the due process to avoid getting scammed, you can watch this video here for more.
Also Read: 7 New Strategies For Lagos Landlords To Avoid Hassles in Real Estate Transactions
CONCLUSION
We can now see that establishing a freight forwarding company in Nigeria demands careful planning and strict adherence to legal requirements.
Therefore, seeking legal help is crucial to getting the legal foundation of your business right.
We offer our services to sophisticated entrepreneurs who are particular about getting it right in the legal foundation of their business right from the get go.
If you need our team to work with you to set up a Freight Forwarding company, you can click HERE to get started.
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